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To Better Understand the Stock Market, You Must Know How It Works

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To Better Understand the Stock Market, You Must Know How It Works

These days, the stock market is an everyday term. Let us know what exactly it is? This is a place where stocks and bonds are “traded” which implies bought and sold. For many people, who want to make quick bucks, this is the first thing that comes to mind for investing. In general, the goal is to buy the stock, hold it for a time, and then sell the stock for more than you paid for it. In a simple statement, it is an aggregation of buyers and sellers of stocks. Stocks are listed and then traded on stock exchange. The largest stock market by market capitalization is the NYSE in the USA.

What is Stock?

Stocks are a share in the ownership of a company. Mainly companies need large funds for setup and growth. Broadly, there are two ways to raise money. In each way, companies have two choices: Either they can borrow the money from some sources, or they can raise it from investors. The company can sell a stake or issue shares of stock in public.

From the perspective of the stock owner it can be explained further as:

Suppose you buy and own the shares, you are a part of the company and its assets. You can claim to own a part of every asset. However, the decision-making power is not in your hand it all depends on the person who holds the ownership of 51%or more than 51%.

On the other side of the moon, stocks can be explained from the perspective of the business:

Suppose you are a business owner, a share market is a place where you can get lots of money if you have accurate stock future tips. And you never have to repay it. All you have to do is show investors that you have a profitable business that could be expanded and could grow into a company that will one day generate billions of dollars. Then you file a bunch of paperwork and investors will give you the money your business needs. Without the share market, nothing would exist today. No airplanes. No cars. Nothing …because it took a lot of money for an idea in one’s head to become a reality. So, we can say that investing is an essential part of modern life.

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